PayPal Working Capital (PPWC), PayPal’s small business lending arm, has issued over $2 billion in loans to over 90,000 small businesses in Australia, the UK, and the US since its 2013 launch, according to a company blog post.

The firm has doubled its volume since it hit the $1 billion mark last October, marking rapid growth.

The firm could continue to see quick growth for several reasons:

Small business need: As of late 2015, only 49% of small businesses with $100,000 to $1 million in annual revenue that applied for funding from large banks received some. That figure drops to 33% for merchants with revenue under $100,000. That provides a big gap that small business lenders like PayPal can fill, especially because many of the businesses that take advantage of the service are located in areas with a limited number of bank branches.

Convenience: PPWC is only available to businesses that are already PayPal customers. That existing relationship simplifies repayments and makes the service easy to access. And PayPal plans to make the service simpler — the firm announced a new mobile website and application and increased its maximum loan amount to better serve merchants.

Ongoing growth in its lending arm will continue to benefit PayPal’s overall line of business. Merchants using PayPal Working Capital pay a flat fee for each loan and then pay back the loan and that fee with a percentage of their daily PayPal sales, giving PayPal a means of gaining revenue from the loans themselves.

But merchants are also using the funds to invest in improving their business — top uses include inventory, cash flow management, and expansion, according to the firm. PayPal has noted that they typically see merchant sales increase after receiving a working capital loan, which translates to higher payment volume and a bump in processing revenue for PayPal.

These businesses need capital in order to grow, but small businesses are underfunded — only half of small businesses with $100,000 to $1 million of annual revenue received at least some of the financing they applied for from large banks in late 2015. This is partially because banks have retreated from this segment because issuing loans to small businesses using the traditional underwriting model is expensive. This leaves a massive amount of unfulfilled loans that we estimate reached $96.5 billion in Q4 2015.

Alternative lending companies have stepped in to capitalize on the opportunity available in helping meet more small business' lending needs.Alternative small business lending platforms use machine learning and digital tools to extend credit to a wide array of small businesses quickly and efficiently, particularly to those that have been rejected by banks. Alternative small business lending companies provide digital platforms that connect small business borrowers to capital using nontraditional means.

We estimate that alternative small business lenders originated $5 billion and had a 4.3% share of the small business lending market in the US in 2015. But alternative small business lending platforms will originate $52 billion and gain a 20.7% share of the total market by 2020, driven by the continued growth of new players, increased borrower awareness and interest, and most importantly, major partnerships with big banks.

Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on small business alternative lending that analyzes the market opportunity for alternative lenders, forecasts the market share and volume growth of alternative lending platforms, profiles key players, and addresses the main industry risks.

Here are some key takeaways from the report:

Alternative lending platforms are in a position to capitalize on this underfunding and also take share from banks. These companies use machine learning and digital tools to extend credit to a wide array of small businesses quickly and efficiently. We estimate that alternative lending companies' share of the small business lending market in the US will reach 20.7% by 2020.

Alternative lenders are now partnering with banks and this will propel growth going forward. New lenders are finding opportunities to offer white-label services to major banks. We expect banking partnerships, like the one between JPMorgan and OnDeck, to add 7.7 percentage points to the alternative lending industry's market share by 2020.

A flurry of new lenders have entered the market, but it's still early innings. A handful of small business lenders, from Funding Circle to Credibly, have entered the market and this is creating challenges as customer acquisition costs rise and alternative lending companies struggle to differentiate themselves.

In full, the report:

Forecasts the market share and volume growth of the small business alternative lending sector, and breaks down the main growth drivers.

Explains why small businesses are underfunded, and quantifies the market opportunity for alternative lenders.

Defines the different types of platforms that alternative lenders employ, including their revenue models.

Lists the advantages and disadvantages that alternative lenders have compared to traditional players.

Overviews the key players in the industry and identifies their growth factors as well as the pain points limiting their growth.

Pinpoints the key risks that could undermine the success of alternative platforms

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